As we celebrate Australia Day, we should remember that our standard of living was the best in the world during the progressive era.

We didn’t slavishly follow others: we did our own thing.

We can do better.

Paradoxically, the following housing analysis and conclusion by Cameron K Murray also has great relevance to inquiries such as the upcoming Productivity Commission inquiry into workplace relations:-

http://ckmurray.blogspot.com.au/2013/06/interpreting-housing-market-indicators.html

Industrial relations need not be an “us v. them” matter.  There is a third alternative about which I have previously expressed my frustration that it is not considered, although it favours both workers AND their bosses – and also has positive implications for housing affordability.

Taxes on productivity ought to be replaced by increased rates and land taxes.

Nice, isn’t it?  A bit better than $1.60 or $1.70!

But the politics involved is incredible – in the truest sense of the word.

In case you haven’t noticed, Russia, as an oil producing and exporting nation, is being given a lesson by the West for invading the Ukraine and taking Crimea.  The Saudis are assisting by continuing to produce oil in a big way at much lower prices.  Why?  Surely, at $50 a barrel, most producers would be inclined to reduce their supply?  But no.  So, Saudi Arabia is certainly on board, assisting the US, Brits (and us?) to punish Putin and the Ruskies over their nefarious Ukrainian exploits? They ARE nefarious, aren’t they?

But wait a moment: isn’t the kingdom of Saudi Arabia Sunni in nature?  And don’t most Arab terrorists hail from extremist sections of Sunnis, rather than Shia?

So that’s quite a clever two-step being danced by Saudi royalty!  How do they manage keeping on side with both extremes – the US and their Sunni terrorist cell cronies?

Meanwhile, at least we get cheap petrol as we attempt to lay waste to Russian oil prices.

Will it be worth it, or will there be a BIG political price to be paid somewhere down the track?  And then you could add China into the mix.  Like Russia, it seems to want to do its own thing, too, and the US also feels threatened by that.

On its centenary, could a replay of WWI be in the offing?

All this craziness because nobody wants to pay the rent for their land and natural resources: we prefer instead to engage in dangerous resource ploys that inevitably lead to depression and war.

THE AGE letters 17 January 2015

I’m glad you ask, PM

Tony Abbott has called on his critics to “provide their own budget savings if they continued to reject the government’s attempts to restore the budget to surplus and pay down the debt” (The Age, 15/1).

Here are some suggestions:  stop subsidising big polluters and reinstate a carbon tax; reinstate an effective mining tax so that we get fairer reimbursement for our shared natural resources; tackle corporate tax avoidance; and have a more equitable paid parental scheme.

Once big business stops “leaning”, we can have a sensible debate about other strategies to fix the budget, including increasing contributions through broader based tax, without making things harder for those who are already struggling the most.

Catherine Chamberlain, Thornbury

QUESTION: We hear that the feds HAD to bail out Fannie and Freddie because
of the terrible consequences of letting them fail. How much of that is real and
how much is bunk? I’d have thought that if the companies go bankrupt, their
stock sells for pennies on the dollar and the new owners can re-negotiate
loans down to lower interest rates for people who can afford to pay something,
while foreclosing and selling (cheap) those homes that had been bought on false
pretences and weren’t going to be paid off at any positive interest rate. Where’s
the catastrophe? Am I missing something important?

ANSWER: Yes, you are missing something important. Banking is a confidence game
because banks borrow short to lend long, making their income on the spread of
interest rates. That means they are at all times technically insolvent, so when
confidence hangs by a thread the whole system can crash, even though for
years it has operated smoothly.

They insure all this with a cushion of capital and surplus that is a small
fraction of their liabilities, well under 10%. So if a small fraction of their
borrowers default it wipes out their capital and surplus, and they stop
lending.

When they move too much of their funds into long-term investments like
buildings, plus land purchases which are even slower to pay out, their loan
turnover slows down so every year they have fewer funds to finance current
production. This is the case today, and it chokes off lots of productive
businesses.

Superficially the lower (commercial) banks avoid this slowdown by selling
their assets to higher (investment) banks, but that just blows dust over what
is really happening. The higher banks end up holding the bag, as now, and they
collapse, as now.

Since FDR, strict banking regulations held the system in check. The Glass-
Steagall Act of 1933 separated commercial banks from investment banks
precisely to protect consumers and commercial borrowers from the risky
behavior of higher banks. Since Newt Gingrich and Rush Limbaugh and Tom DeLay
took over, these regs have been repealed, including Glass-Steagall in 1999.
The ensuing crash, set up by doctrinaire neocons blinded by Chicago-school
economic theology and Bush imperialism, is likely to match 1929.

In previous busts the U.S. Treasury could hold the final bag. Now, however,
the U.S. Treasury itself is vulnerable, depending on loans from foreign
nations. So we inflate the currency and devalue the dollar in a vain effort to
prevent further collapse of real estate values and further seizing up of the
commercial banking system.

Bernanke and Paulson, no fools, are making lemonade as best one could hope. I
would nonetheless fault them for cooperating with an administration that
refuses to raise taxes or cut military spending and related puppet-propping
subventions. We need to do what Clinton did: “reverse crowding out”–paying off
government bonds to put money back into the hands of consumers and, especially, investors.

Of course this leads right into income tax reform, which is more Paulson’s
business than Bernanke’s. We need steeply progressive income and corporate
taxes and an end to special treatment of real estate, oil and other natural
resources.

Bernanke’s business should be to promote selective credit controls, especially
to restrict bank lending on real estate collateral.

Mason Gaffney
21 September 2008

www.masongaffney.org

Soos and Egan on MacroBusiness

Insightful data!

The Peoples Voice reports on Michael Hudson’s “The Bubble and Beyond”.

A pithy but accurate account of where we find ourselves today.

Philip Soos in MacroBusiness

http://english.caixin.com/2014-12-23/100767114.html
Why not? Common sense demands it.